Under IFRS – disclosures is an area of significant change that must be addressed early on in the

conversion process planning. According to lessons learned in other countries, it was noted that

disclosures were pushed off until the very end of the transition, and that was a big mistake. Often

it will be necessary to create systems and processes that gather information for disclosures and

that will take time and effort.

Companies may not have information available for all these new required disclosures.

Companies may have dealt with all the recognition and measurement issues, and think they are

ready to draft IFRS based financial statements only to realize that they have to disclose new

requirements, and the information is not available. This most definitely has implications for

addressing the data gathering processes in a company’s IFRS project planning.

Organizations will need to take a look at everything that is already being disclosed under

Canadian GAAP, and then determine what IFRS disclosures are required. Then, the company

must evaluate which additional disclosures must be included in the financial statements and then

proceed one step further and pose the question – what information is required to meet these

disclosures?

An example of additional disclosures under IFRS is the need to provide more information about

“management judgement and uncertainties”, not all of which is currently required under

Canadian GAAP. The extent to which the systems are capable of generating this information and

likewise the extent to which financial reporting systems produce information with sufficient

detail to extract some information could offer some difficulties.

As IFRS is principles based, it gives preparers more choice with regard to how to account for

something, it then compensates for this by requiring more disclosures so companies can explain

how an item was actually accounted for. That additional information and note disclosures is

designed to assist with comparability – the notion is that if companies are able to have a little

more flexibility in the accounting with IFRS, then companies should explain exactly how the

item was accounted for.

However, thought should be given to which disclosures are necessary and essential, and what

may be required specifically for the company and industry. There are IFRS disclosure checklists

available to support this analysis, but keep in mind that some of the checklists are very detailed

and lengthy (example 200 pages) and may be beyond the scope or not relevant to many smaller

entities. Therefore, these tools should be used with discretion, concentrating primarily on the

areas that are relevant to your specific organization.

An entity’s first financial statement under IFRS-1 requires reconciliation between the prior

Canadian GAAP results, and the new IFRS based results. This, combined with an explanation of

changes in accounting policies can significantly increase the volume of disclosures in the first

IFRS statements. This will be necessary in the first quarterly financial statements of 2011 in

accordance with IFRS, as well as the first annual statements. Afterwards, these particular

additional disclosures will no longer be required.

It is important to address disclosure issues early, as it was learned in other international IFRS

conversion projects that disclosures were left to the very end of the project, and this created

significant problems. Luckily for Canada, we can learn from the experience of others, and

consider disclosures in tandem with all other aspects of IFRS reporting requirements. The end

result – well formulated disclosures and more accurate and relevant financial statements.

I hope this helps. This is one of a series of blogs that is meant to convey information relating to

Canada’s transition from Canadian GAAP to IFRS.

For further information, please refer to the ongoing series of IFRS blogs on the GFS Consulting

web-site and please remember to contact your accounting professional for further guidance.

IFRS 8

IFRS 8 Operating Segments requires particular classes of entities (essentially those with publicly

traded securities) to disclose information about their operating segments, products and services,

geographical areas in which they operates, and their major customers. Information is based on

internal management reports, both in the identification of operating segments and measurement

of disclosed segment information.

IFRS 8 was issued in November 2006 and applies to annual periods beginning on or after 1

January 2009.

Disclosure requirements

Required disclosures include:

general information about how the entity identified its operating segments and the types

of products and services from which each operating segment derives its revenues [IFRS

8.22]

information about the reported segment profit or loss, including certain specified

revenues and expenses included in segment profit or loss, segment assets and segment

liabilities, and the basis of measurement [IFRS 8.21(a) and 27]

reconciliations of the totals of segment revenues, reported segment profit or loss, segment

assets, segment liabilities and other material items to corresponding items in the entity's

financial statements [IFRS 8.21(b) and 28]

some entity-wide disclosures that are required even when an entity has only one

reportable segment, including information about each product and service or groups of

products and services [IFRS 8.32]

analyses of revenues and certain non-current assets by geographical area – with an

expanded requirement to disclose revenues/assets by individual foreign country (if

material), irrespective of the identification of operating segments [IFRS 8.33]

information about transactions with major customers [IFRS 8.34]

Considerable segment information is required at interim reporting dates by IAS 34.

IFRS 7

IFRS 7 Financial Instruments: Disclosures requires disclosure of information about the

significance of financial instruments to an entity, and the nature and extent of risks arising from

those financial instruments, both in qualitative and quantitative terms. Specific disclosures are

required in relation to transferred financial assets and a number of other matters.

IFRS 7 was originally issued in August 2005 and applies to annual periods beginning on or after

1 January 2007.

Nature and extent of exposure to risks arising from financial instruments

Qualitative disclosures [IFRS 7.33]

The qualitative disclosures describe:

o risk exposures for each type of financial instrument

o management's objectives, policies, and processes for managing those risks

o changes from the prior period

Quantitative disclosures

The quantitative disclosures provide information about the extent to which the entity is

exposed to risk, based on information provided internally to the entity's key management

personnel. These disclosures include: [IFRS 7.34]

o summary quantitative data about exposure to each risk at the reporting date

o disclosures about credit risk, liquidity risk, and market risk and how these risks

are managed as further described below

o concentrations of risk

Credit Risk

Credit risk is the risk that one party to a financial instrument will cause a loss for the

other party by failing to pay for its obligation. [IFRS 7. Appendix A]

Disclosures about credit risk include: [IFRS 7.36-38]

o maximum amount of exposure (before deducting the value of collateral),

description of collateral, information about credit quality of financial assets that

are neither past due nor impaired, and information about credit quality of financial

assets whose terms have been renegotiated [IFRS 7.36]

o for financial assets that are past due or impaired, analytical disclosures are

required [IFRS 7.37]

o information about collateral or other credit enhancements obtained or called

[IFRS 7.38]

Liquidity Risk

Liquidity risk is the risk that an entity will have difficulties in paying its financial

liabilities. [IFRS 7. Appendix A]

Disclosures about liquidity risk include: [IFRS 7.39]

o a maturity analysis of financial liabilities

o description of approach to risk management

Market Risk [IFRS 7.40-42]

Market risk is the risk that the fair value or cash flows of a financial instrument will

fluctuate due to changes in market prices. Market risk reflects interest rate risk, currency

risk and other price risks. [IFRS 7. Appendix A]

Disclosures about market risk include:

o a sensitivity analysis of each type of market risk to which the entity is exposed

o additional information if the sensitivity analysis is not representative of the

entity's risk exposure (for example because exposures during the year were

different to exposures at year-end).

o IFRS 7 provides that if an entity prepares a sensitivity analysis such as value-at-

risk for management purposes that reflects interdependencies of more than one

component of market risk (for instance, interest risk and foreign currency risk

combined), it may disclose that analysis instead of a separate sensitivity analysis

for each type of market risk

Transfers of financial assets [IFRS 7.42A-H]

An entity shall disclose information that enables users of its financial statements:

a. to understand the relationship between transferred financial assets that are not

derecognised in their entirety and the associated liabilities; and

b. to evaluate the nature of, and risks associated with, the entity's continuing involvement in

derecognised financial assets. [IFRS 7 42B]

Transferred financial assets that are not derecognised in their entirety

Required disclosures include description of the nature of the transferred assets, nature of

risk and rewards as well as description of the nature and quantitative disclosure depicting

relationship between transferred financial assets and the associated liabilities. [IFRS

7.42D]

Transferred financial assets that are derecognised in their entirety

Required disclosures include the carrying amount of the assets and liabilities recognised,

fair value of the assets and liabilities that represent continuing involvement, maximum

exposure to loss from the continuing involvement as well as maturity analysis of the

undiscounted cash flows to repurchase the derecognised financial assets. [IFRS 7.42E]

Additional disclosures are required for any gain or loss recognised at the date of transfer

of the assets, income or expenses recognise from the entity's continuing involvement in

the derecognised financial assets as well as details of uneven distribution of proceed from

transfer activity throughout the reporting period. [IFRS 7.42G]

IFRS 1

IFRS 1 First-time Adoption of International Financial Reporting Standards sets out the

procedures that an entity must follow when it adopts IFRSs for the first time as the basis

for preparing its general purpose financial statements. The IFRS grants limited

exemptions from the general requirement to comply with each IFRS effective at the end

of its first IFRS reporting period.

A restructured version of IFRS 1 was issued in November 2008 and applies if an entity's

first IFRS financial statements are for a period beginning on or after 1 July 2009.

Disclosures in the financial statements of a first-time adopter

IFRS 1 requires disclosures that explain how the transition from previous GAAP to IFRS

affected the entity's reported financial position, financial performance and cash flows. [IFRS

1.23] This includes:

1. reconciliations of equity reported under previous GAAP to equity under IFRS both (a) at

the date of the opening IFRS balance sheet and (b) the end of the last annual period

reported under the previous GAAP. [IFRS 1.24(a)] (For an entity adopting IFRSs for the

first time in its 31 December 2009 financial statements, the reconciliations would be as of

1 January 2008 and 31 December 2008.)

2. reconciliations of total comprehensive income for the last annual period reported under

the previous GAAP to total comprehensive income under IFRSs for the same period

[IFRS 1.24(b)]

3. explanation of material adjustments that were made, in adopting IFRSs for the first time,

to the balance sheet, income statement and cash flow statement [IFRS 1.25]

4. if errors in previous GAAP financial statements were discovered in the course of

transition to IFRSs, those must be separately disclosed [IFRS 1.26]

5. if the entity recognised or reversed any impairment losses in preparing its opening IFRS

balance sheet, these must be disclosed [IFRS 1.24(c)]

6. appropriate explanations if the entity has elected to apply any of the specific recognition

and measurement exemptions permitted under IFRS 1 – for instance, if it used fair values

as deemed cost

Disclosures in interim financial reports

If an entity is going to adopt IFRSs for the first time in its annual financial statements for the

year ended 31 December 2009, certain disclosure are required in its interim financial statements

prior to the 31 December 2009 statements, but only if those interim financial statements purport

to comply with IAS 34 Interim Financial Reporting. Explanatory information and a

reconciliation are required in the interim report that immediately precedes the first set of IFRS

annual financial statements. The information includes reconciliations between IFRS and previous

GAAP. [IFRS 1.32]

IFRS 9

IFRS 9 Financial Instruments sets out the recognition and measurement requirements for

financial instruments and some contracts to buy or sell non-financial items. The IASB is adding

to the standard as it completes the various phases of its comprehensive project on financial

instruments, and so it will eventually form a complete replacement for IAS   39 Financial

Instruments: Recognition and Measurement.

IFRS 9 was originally issued in November 2009, reissued in October 2010, and applies to annual

periods beginning on or after 1 January 2015.

IFRS 10

IFRS 10 Consolidated Financial Statements outlines the requirements for the preparation and

presentation of consolidated financial statements, requiring entities to consolidate entities it

controls. Control requires exposure or rights to variable returns and the ability to affect those

returns through power over an investee.

IFRS 10 was issued in May 2011 and applies to annual periods beginning on or after 1 January

2013.

Disclosure

There are no disclosures specified in IFRS 10. Instead, IFRS 12 Disclosure of Interests in Other

Entities outlines the disclosures required.

IFRS 11

IFRS 11 Joint Arrangements outlines the accounting by entities that jointly control an

arrangement. Joint control involves the contractual agreed sharing of control and arrangements

subject to joint control are classified as either a joint venture (representing a share of net assets

and equity accounted) or a joint operation (representing rights to assets and obligations for

liabilities, accounted for accordingly).

IFRS 11 was issued in May 2011 and applies to annual reporting periods beginning on or after 1

January 2013.

Disclosure

There are no disclosures specified in IFRS 11. Instead, IFRS 12 Disclosure of Interests in Other

Entities outlines the disclosures required.

Applicability and early adoption

Note: This section has been updated to reflect the amendments to IFRS 11 made in June 2012.

IFRS 11 is applicable to annual reporting periods beginning on or after 1 January 2013.

[IFRS 11:Appendix C1]

When IFRS 11 is first applied, an entity need only present the quantitative information required

by paragraph 28(f) of IAS 8 for the annual period immediately preceding the first annual period

for which the standard is applied [IFRS 11:C1B]

Special transitional provisions are included for: [IFRS 11.Appendix C2-C13]

transition from proportionate consolidation to the equity method for joint ventures

transition from the equity method to accounting for assets and liabilities for joint

operations

transition in an entity's separate financial statements for a joint operation previously

accounted for as an investment at cost.

In general terms, the special transitional adjustments are required to be applied at the beginning

of the immediately preceding period (rather than the the beginning of the earliest period

presented).  However, an entity may choose to present adjusted comparative information for

earlier reporting periods, and must clearly identify any unadjusted comparative information and

explain the basis on which the comparative information has been prepared [IFRS 11.C12A-

C12B].

An entity may apply IFRS 11 to an earlier accounting period, but if doing so it must disclose the

fact that is has early adopted the standard and also apply: [IFRS 11.Appendix C1]

IFRS 10 Consolidated Financial Statements

IFRS 12 Disclosure of Interests in Other Entities

IAS 27 Separate Financial Statements (as amended in 2011)

IAS 28 Investments in Associates and Joint Ventures (as amended in 2011).

IFRS 12

IFRS 12 Disclosure of Interests in Other Entities is a consolidated disclosure standard requiring

a wide range of disclosures about an entity's interests in subsidiaries, joint arrangements,

associates and unconsolidated 'structured entities'. Disclosures are presented as a series of

objectives, with detailed guidance on satisfying those objectives.

IFRS 12 was issued in May 2011 and applies to annual periods beginning on or after 1 January

2013.

Disclosures required

Important note: The summary of disclosures that follows is a high-level summary of the main

requirements of IFRS 12. It does not list every specific disclosure required by the standard, but

instead highlights the broad objectives, categories and nature of the disclosures required. IFRS 12

lists specific examples and additional disclosures which further expand upon the disclosure

objectives, and includes other guidance on the disclosures required. Accordingly, readers should

not consider this to be a comprehensive or complete listing of the disclosure requirements of

IFRS 12.

Significant judgements and assumptions

An entity discloses information about significant judgements and assumptions it has made (and

changes in those judgements and assumptions) in determining: [IFRS 12:7]

that it controls another entity

that it has joint control of an arrangement or significant influence over another entity

the type of joint arrangement (i.e. joint operation or joint venture) when the arrangement

has been structured through a separate vehicle.

Interests in subsidiaries

An entity shall disclose information that enables users of its consolidated financial statements to:

[IFRS 12:10]

understand the composition of the group

understand the interest that non-controlling interests have in the group's activities and

cash flows

evaluate the nature and extent of significant restrictions on its ability to access or use

assets, and settle liabilities, of the group

evaluate the nature of, and changes in, the risks associated with its interests in

consolidated structured entities

evaluate the consequences of changes in its ownership interest in a subsidiary that do not

result in a loss of control

evaluate the consequences of losing control of a subsidiary during the reporting period.

Interests in unconsolidated subsidiaries

[Note: The investment entity consolidation exemption referred to in this section was introduced

by Investment Entities, issued on 31 October 2012 and effective for annual periods beginning on

or after 1 January 2014.]

In accordance with IFRS   10 Consolidated Financial Statements, an investment entity is required

to apply the exception to consolidation and instead account for its investment in a subsidiary at

fair value through profit or loss. [IFRS 10:31].

Where an entity is an investment entity, IFRS 12 requires additional disclosure, including:

the fact the entity is an investment entity [IFRS 12:19A]

information about significant judgements and assumptions it has made in determining

that it is an investment entity, and specifically where the entity does not have one or more

of the 'typical characteristics' of an investment entity  [IFRS 12:9A]

details of subsidiaries that have not been consolidated (name, place of business,

ownership interests held) [IFRS 12:19B]

details of the relationship and certain transactions between the investment entity and the

subsidiary (e.g. restrictions on transfer of funds, commitments, support arrangements,

contractual arrangements) [IFRS 12: 19D-19G]

information where an entity becomes, or ceases to be, an investment entity [IFRS 12:9B]

An entity making these disclosures are not required to provide various other disclosures required

by IFRS 12 [IFRS 12:21A, IFRS 12:25A].

Interests in joint arrangements and associates

An entity shall disclose information that enables users of its financial statements to evaluate:

[IFRS 12:20]

the nature, extent and financial effects of its interests in joint arrangements and

associates, including the nature and effects of its contractual relationship with the other

investors with joint control of, or significant influence over, joint arrangements and

associates

the nature of, and changes in, the risks associated with its interests in joint ventures and

associates.

Interests in unconsolidated structured entities

An entity shall disclose information that enables users of its financial statements to: [IFRS 12:24]

understand the nature and extent of its interests in unconsolidated structured entities

evaluate the nature of, and changes in, the risks associated with its interests in

unconsolidated structured entities.

Applicability and early adoption

Note: This section has been updated to reflect the amendments to IFRS 12 made in June 2012

and October 2012.

[IFRS 12: Appendix C]

IFRS 12 is applicable to annual reporting periods beginning on or after 1 January 2013. Early

application is permitted.

The disclosure requirements of IFRS 12 need not be applied for any period presented that begins

before the annual period immediately preceding the first annual period for which IFRS 12 is

applied [IFRS 12:C2A]

Entities are encouraged to voluntarily provide the information required by IFRS 12 prior to its

adoption. Providing some of the disclosures required by IFRS 12 does not compel an entity to

comply with all of the requirements of the IFRS or to also apply:

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IAS 27 Separate Financial Statements (2011)

IAS 28 Investments in Associates and Joint Ventures (2011).

IFRS 13

IFRS 13 Fair Value Measurement applies to IFRSs that require or permit fair value

measurements or disclosures and provides a single IFRS framework for measuring fair value and

requires disclosures about fair value measurement. The Standard defines fair value on the basis

of an 'exit price' notion and uses a 'fair value hierarchy', which results in a market-based, rather

than entity-specific, measurement.

IFRS 13 was originally issued in May 2011 and applies to annual periods beginning on or

after 1 January 2013.

Disclosure

Disclosure objective

IFRS 13 requires an entity to disclose information that helps users of its financial statements

assess both of the following: [IFRS 13:91]

for assets and liabilities that are measured at fair value on a recurring or non-recurring

basis in the statement of financial position after initial recognition, the valuation

techniques and inputs used to develop those measurements

for fair value measurements using significant unobservable inputs (Level 3), the effect of

the measurements on profit or loss or other comprehensive income for the period.

Disclosure exemptions

The disclosure requirements are not required for: [IFRS 13:7]

plan assets measured at fair value in accordance with IAS 19 Employee Benefits

retirement benefit plan investments measured at fair value in accordance with IAS 26

Accounting and Reporting by Retirement Benefit Plans

assets for which recoverable amount is fair value less costs of disposal in accordance with

IAS 36 Impairment of Assets.

Identification of classes

Where disclosures are required to be provided for each class of asset or liability, an entity

determines appropriate classes on the basis of the nature, characteristics and risks of the asset or

liability, and the level of the fair value hierarchy within which the fair value measurement is

categorised. [IFRS 13:94]

Determining appropriate classes of assets and liabilities for which disclosures about fair value

measurements should be provided requires judgement. A class of assets and liabilities will often

require greater disaggregation than the line items presented in the statement of financial position.

The number of classes may need to be greater for fair value measurements categorised within

Level 3.

Some disclosures are differentiated on whether the measurements are:

Recurring fair value measurements – fair value measurements required or permitted by

other IFRSs to be recognised in the statement of financial position at the end of each

reporting period

Non-recurring fair value measurements are fair value measurements that are required or

permitted by other IFRSs to be measured in the statement of financial position in

particular circumstances.

Specific disclosures required

To meet the disclosure objective, the following minimum disclosures are required for each class

of assets and liabilities measured at fair value (including measurements based on fair value

within the scope of this IFRS) in the statement of financial position after initial recognition (note

these are requirements have been summarised and additional disclosure is required where

necessary): [IFRS 13:93]

the fair value measurement at the end of the reporting period*

for non-recurring fair value measurements, the reasons for the measurement*

the level of the fair value hierarchy within which the fair value measurements are

categorised in their entirety (Level 1, 2 or 3)*

for assets and liabilities held at the reporting date that are measured at fair value on a

recurring basis, the amounts of any transfers between Level 1 and Level 2 of the fair

value hierarchy, the reasons for those transfers and the entity's policy for determining

when transfers between levels are deemed to have occurred, separately disclosing and

discussing transfers into and out of each level

for fair value measurements categorised within Level 2 and Level 3 of the fair value

hierarchy, a description of the valuation technique(s) and the inputs used in the fair value

measurement, any change in the valuation techniques and the reason(s) for making such

change (with some exceptions)*

for fair value measurements categorised within Level 3 of the fair value hierarchy,

quantitative information about the significant unobservable inputs used in the fair value

measurement (with some exceptions)

for recurring fair value measurements categorised within Level 3 of the fair value

hierarchy, a reconciliation from the opening balances to the closing balances, disclosing

separately changes during the period attributable to the following:

o total gains or losses for the period recognised in profit or loss, and the line item(s)

in profit or loss in which those gains or losses are recognised – separately

disclosing the amount included in profit or loss that is attributable to the change in

unrealised gains or losses relating to those assets and liabilities held at the end of

the reporting period, and the line item(s) in profit or loss in which those

unrealised gains or losses are recognised

o total gains or losses for the period recognised in other comprehensive income, and

the line item(s) in other comprehensive income in which those gains or losses are

recognised

o purchases, sales, issues and settlements (each of those types of changes disclosed

separately)

o the amounts of any transfers into or out of Level 3 of the fair value hierarchy, the

reasons for those transfers and the entity's policy for determining when transfers

between levels are deemed to have occurred. Transfers into Level 3 shall be

disclosed and discussed separately from transfers out of Level 3

for fair value measurements categorised within Level 3 of the fair value hierarchy, a

description of the valuation processes used by the entity

for recurring fair value measurements categorised within Level 3 of the fair value

hierarchy:

o a narrative description of the sensitivity of the fair value measurement to changes

in unobservable inputs if a change in those inputs to a different amount might

result in a significantly higher or lower fair value measurement. If there are

interrelationships between those inputs and other unobservable inputs used in the

fair value measurement, the entity also provides a description of those

interrelationships and of how they might magnify or mitigate the effect of changes

in the unobservable inputs on the fair value measurement

o for financial assets and financial liabilities, if changing one or more of the

unobservable inputs to reflect reasonably possible alternative assumptions would

change fair value significantly, an entity shall state that fact and disclose the effect

of those changes. The entity shall disclose how the effect of a change to reflect a

reasonably possible alternative assumption was calculated

if the highest and best use of a non-financial asset differs from its current use, an entity

shall disclose that fact and why the non-financial asset is being used in a manner that

differs from its highest and best use*.

'*' in the list above indicates that the disclosure is also applicable to a class of assets or

liabilities which is not measured at fair value in the statement of financial position but for which

the fair value is disclosed. [IFRS 13:97]

Quantitative disclosures are required to be presented in a tabular format unless another format is

more appropriate. [IFRS 13:99]